Paying for Trump’s border wall: how taxing remittances could lead to greater immigration

By Nathan Davis on July 17, 2017

President Trump’s hardline stance towards Mexico was one of the most contentious aspects of his campaign and the first months of his presidency. In his campaign announcement speech in 2015, Donald Trump said that immigrants from Mexico were rapists and criminals.

Xenophobic comments like these and Trump’s perennial call for a border wall paid for by Mexico has brought US-Mexico relations to their lowest point since General Pershing’s expedition into northern Mexico in 1916.

Eventually, but at a later date so we can get started early, Mexico will be paying, in some form, for the badly needed border wall.

While President Trump has bellicose rhetoric in abundance, his administration has remained quiet on how it intends to implement its Mexico policy. This is especially true in relation to Trump’s great wall along the southern border.

As one of his first executive orders, President Trump called for “the immediate construction of a physical wall on the southern border, monitored and supported by adequate personnel so as to prevent illegal immigration, drug and human trafficking, and acts of terrorism.”

….the wall is not built, which it will be, the drug situation will NEVER be fixed the way it should be!#BuildTheWall

During an executive order signing on April 25, 2017, President Trump took several questions. However, when he was asked about the border wall he evaded the question.

Q Will you sign a CR if it doesn’t include funding for the wall?

THE PRESIDENT: Say it?

Q Will you sign a CR to continue funding the government if it doesn’t include —

THE PRESIDENT: The wall is going to get built, by the way. Just in case anybody has any question: The wall is going to get built, and the wall is going to stop drugs, and it’s going to stop a lot of people from coming in that shouldn’t be here, and it’s going to have a huge effect on human trafficking, which is a tremendous problem in this world — a problem that nobody talks about — but it’s a problem that’s probably worse than any time in the history of this world. Human trafficking, what’s going on.

The wall is going to get built, and we’re setting record numbers in terms of stopping people from coming in, and stopping drugs from coming in. You see the numbers down 73, 74 percent. I will say, Secretary Kelly — formerly General Kelly — is doing an incredible job. And I was just with him a little while ago, and he said we definitely, desperately need the wall. And we’re going to have the wall built. I mean, I don’t know why people are talking. I watch these shows, and the pundits in the morning — they don’t know what they’re talking about. The wall gets built — 100 percent. Thank you very much.

This exchange struck at the heart of President Trump’s biggest immigration hurdle: how will he pay for his wall?

Remittance Tax

During the campaign and well into his presidency, Donald Trump reiterated that Mexico would pay for a new wall along the entire US-Mexico border. The cost of such a wall is a matter of political debate. As Time reported on April 18, 2017, Democratic and Republican estimates place the cost of Trump’s wall between $20 billion and $70 billion.

That price tag could rise even higher as President Trump recently proposed that the wall should be a “solar wall” by which he most likely means covered or topped with PV panel arrays. However, these additions, much like his other threats and promises, will most likely come to nothing in the end.

So far, the administration has not been forthcoming with details about how it would like to pay for the wall other than general discretionary spending cuts. Representative Mike Rogers, a Republican from Alabama, introduced a bill in March that would raise revenue for border security by taxing remittances sent to countries in Latin America and the Caribbean.

House Resolution 1813, the Border Wall Funding Act of 2017 would place a two percent tax on remittances from the United States to all countries and foreign possessions in Latin America and the Caribbean. While the bill would not specifically appropriate money for a wall, it does require that revenue from the bill “be expended for the purpose of improving border security.”

According to 2015 data from the Pew Research Center, remittances from the US to Latin America and the Caribbean were more than $50 billion. Assuming that remittances remain at approximately the same level, Congressman Roger’s bill would raise approximately $1 billion a year for border security. Far short of the $20 billion that the White House estimates the wall would cost.

This bill and other similar proposals fit within the conservative mindset of illegal immigrants as “takers” who take jobs from citizens and do not pay taxes. However, a tax on remittances sent to Latin America and the Caribbean would not be in the United States’ domestic or international interests and would have negative effects throughout the Americas.

Remittances and Migration

Remittances from the United States to Latin America and the Caribbean totaled more than $50 billion in 2015 with $24.3 billion sent to Mexico alone. These remittances go directly to families and help supplement meager household incomes in developing regions. The money is used primarily for basic necessities like food, housing, healthcare, and education, as well as to help finance small family businesses.

A 2006 article by Lina Cardona Sosa and Carlos Medina of the Central Bank of Colombia shows how remittances from the United States had a positive effect in Colombia. The researchers used data tied to a wave of emigration during the 1990s and find “a positive effect over education, beneficiary households expending about 10% of total expenditure more in education than non beneficiaries.” They conclude that “international migration ended up working on the one hand, as a possibility to gain access to private education, and on the other hand, as a safety net for some of the affected households in the economic crisis that took place at the end of the 1990s in Colombia.”

The positive effects of remittances in recipient countries trickles back to advanced countries like the United States. Families in Latin American and the Caribbean that receive money from family members working in the United States have less impetus to leave their homes to make the dangerous journey to come to the US. The economic incentive not to migrate that remittances provide is especially helpful for countries where violence is prevalent, such as Guatemala, El Salvador, and Honduras.

The three Central American countries of Guatemala, El Salvador, and Honduras make up the Northern Triangle. This area has seen significant violence in recent years and has traditionally been a large source of illegal migrants to the United States. In 2014, there were 1,323,000 migrations from El Salvador, 909,000 from Guatemala, and 569,000 from Honduras. The situation came to a head in 2014 when tens of thousands of unaccompanied minors migrated to the United States and were detained at the border by Customs and Border Protection officers.

The unaccompanied minor migrant crisis led to a renewed and contentious debate on immigration policy. While illegal immigration from Latin America has been a hot topic in American politics for decades, the current administration has capitalized on the issue and catapulted it back to the front of the national dialog. However, President Trump’s policy proposals to build a wall and further militarize the border will not address the underlying issues that push men, women, and children from Latin America and the Caribbean to migrate, both legally and illegally, to the United States.

If President Trump and the Republican majority want to prevent illegal immigration to the United States from countries south of the border, then they should not build a wall or tax remittances. Instead, President Trump and the Congress should increase foreign aid to help countries like Guatemala, El Salvador, and Honduras grow economically, generate jobs, and decrease violent crime.

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